Structured Portfolio Management LLC, Don Brownstein’s $3.2 billion Stamford, Connecticut-based mortgage hedge fund, plans to start a pool to buy and rent out homes.
The firm may introduce the fund to investors within weeks, Brownstein said in a letter to clients dated June 12, a copy of which was obtained by Bloomberg News. He didn’t say how much capital has been raised or targeted.
“There will be a significant transformation in the way in which single family homes are owned and occupied in the United States,” Brownstein said in the letter. The strategy is to acquire homes through distressed sales and rent them out profitably, perhaps to the former owner, then “sometime in the not distant future, sell the houses and reap a profit from a recovery in prices.”
Investors are trying to spend at least $6.4 billion on single-family rentals, including from funds such as Colony Capital LLC, GTIS Partners, KKR & Co., Oaktree Capital Group LLC, Och-Ziff Capital Management Group LLC and the Alaska Permanent Fund Corp. They want to take advantage of U.S. home prices that are 35 percent below the 2006 peak and growing demand for rentals as the homeownership rate sits at the lowest level since 1997.
Brownstein’s SPM Core fund rose 1.5 percent in May and returned 8.7 percent since the start of the year. Structured Servicing Holdings LP, the part of his main SPM Core Fund that focuses on mortgage debt lacking government backing, returned 50 percent in the first 10 months of 2010, putting him at the top of Bloomberg Markets’ list of the 100 best-performing funds managing $1 billion or more.
The SPM Core Fund reopened to new investments on June 1 as the firm identified investment opportunities, particularly in agency mortgages that are backed by the government, Brownstein said in the letter.
Structured Portfolio Management also hired Sean Li, who was formerly at BlackRock Inc., where he worked on models for non-agency mortgages, and Munish Gupta, who was most recently at Morgan Stanley in the investment management division, where he was a member of the mortgage-backed securities research team, Brownstein said.
The firm declined to comment on the letter.